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Date: 17/12/2008

UAE to follow Saudi Arabia with regard to slashing bank interest rates

Though UAE Central Bank has no plans to cut interest rates but with Saudi Arabia slashing its interest rates, its GCC counterpart is also suppose to follow suit. Saudi Arabia's central bank recently cut two key lending rates by 50 basis points. Until late October, the UAE had been keeping its benchmark overnight repurchase rate at the same level as the Fed funds rate.

The Fed is expected to cut rates by 50 basis points to 0.5 per cent, and most states in the oil-exporting Gulf have tended to shadow American interest rate policy to maintain the relative value of their dollar-pegged currencies.

Al Suwaidi said this week that policymakers in the GCC, which also includes Saudi Arabia, Kuwait, Qatar, Oman and Bahrain, wanted to coordinate their interest rates as most of them prepare for monetary union.